The timing of the TSB float isn't great but deadline looms for Lloyds

TSB was reborn on the high street last September, next month it will list on the London Stock Exchange and begin the process of cutting the umbilical chord that links it with Lloyds Banking Group.

Lloyds is being forced to sell TSB, its 631 branches and its 4.5 million customers, in return for the taxpayer support that kept the bank going during the financial crisis.

This is the same slice of Lloyds that the Co-op had agreed to pay £1.5 billion for. That agreement imploded spectacularly just over a year ago, Lloyds will give us some indication about how much it hopes to raise via an IPO when it publishes the prospectus in a few weeks time.

In a call with journalists this morning, the TSB chief executive, Paul Pester, has been channelling the Reverend Henry Duncan who founded TSB in 1810 as "an economical bank for the savings of the industrious".

At a time when all the evidence is that we struggle to identify compelling differences between the various banks that compete for our business TSB is setting its stall out as the challenger with principles.

Pester says the traditional "savings and loans" model is attractive to customers - he notes that the number of people opening current accounts with TSB has jumped almost fivefold in the last year but will the shares prove appealing?

The TSB mortgage book is described as "historically low loss", the customer base "stable", the capital base "strong" and the fact TSB has an "indemnity" against all past abuses means the cost of any compensation claims that have yet to emerge (PPI, interest rate swaps etc) will continue to end up with Lloyds.

Up to one fifth of the shares up for grabs are expected to be made available to individual (retail) investors who will also being offered a "buy twenty shares, get one free" sweetener, although the shares have to be retained for more than a year to qualify. It's an intriguing attempt to nurture a stronger sense of long-term ownership.

TSB chief executive Paul Pester. Credit: PA

There may be some investors who take the view that TSB is the safe bet that offers returns that are too modest. The bank has confirmed this morning that it will not be rewarding shareholders in the form of a dividend until 2017.

TSB says it wants to use every penny of profit it makes in the short term to invest in growth which, of course, assumes that there's growth to be had.

TSB wants to write more mortgages at a time of disquiet about the housing market and is seeking to steal current accounts from its rivals at a time when there are concerns that the established players have a stranglehold on the market.

Lloyds is also taking the decision to list TSB at a time when there is a queue of companies waiting to do the same and investors' enthusiasm for listings in general seems to be waning.

Last week Fat Face abandoned its IPO attempt and on Friday Saga was forced to sell shares at 185 pence, right at the bottom of the 185 - 245 range.

TSB will argue that most of the crowd are retailers, that as a bank it offers investors something unique. Maybe, but at the end of the day only one quarter of the bank is being floated - the minimum required under London's listing rules - so confidence isn't sky high.

The timing isn't great but Lloyds is running out of time. The deadline on 2015 looms. Lloyds is moving now and will hope to make the best of it.